Eight Reasons Why Traders Keep Losing Money

There are some very common bad habits that frequently cause traders to keep losing. Identifying these habits is the first step to changing them.

Hand holding out money.
Hand holding out money. George Marks/Retrofile/Getty Images

This article originally appeared on timothysykes.com.

Every trader has his or her share of ups and downs. But, if you’re losing money habitually, like most traders do, then chances are that there are some very simple explanations as to why.

Luckily, just because you have been losing money doesn’t mean that you have to continue on this track, especially if you learn to prepare better, using the rules outlined in free guides, like this.

There are some very common bad habits that frequently cause traders to keep losing. Identifying these habits is the first step to changing them.

Here, I’ll talk about 8 common reasons why people lose money and how you can work to turn things around.

1. You don’t understand how the stock market works. Why walk when you can run? If that’s your mentality, chances are that you never bothered to learn how the stock market really works, before you started trading. How’s that working out for you? Chances are, you’re losing more than you’re making.

Listen, I’m all for diving in and going for it. It’s important to have that bravery and, to a certain degree, that type of bravado. But, if you really want to make consistent money in the stock market, you’re going to have to invest more time in learning stock trading rules, like these, before you’re going to see reliable returns.

Take the time to learn how to trade stocks. Learn about penny stocks. Join my millionaire trading challenge. Read all that you can. All of the knowledge that you absorb will make you a better trader.

2. You don’t save. What do you do after a successful trade? Do you go out and splurge on a new car, a vacation or a big night out? This could be why you keep losing money.

The fact is, you need money to make money. You’re never going to improve your position in the stock market, if you keep on blowing your proceeds. You won’t have more money to invest, which means that you’re putting a cap on how much you could make.

Many longtime millionaires save a big portion–sometimes even the majority–of what they make. This isn’t because they are misers. This is because they know that by saving this money, they will have more to invest next time. This allows your income to grow, as your skills grow. So, even if you follow the same process, over time, as you are able to invest more, your returns will be bigger. This means that if you can delay satisfaction just a bit, to a time when your trades get bigger, your expendable money will also grow. And, it means that it’s only a matter of time before those cars and vacations are within your reach, but won’t drain your bank account.

3. You don’t track what’s working. As you’re growing as a trader, you notice that some things work and others don’t. But, are you really taking the time to evaluate what is working and why?

Don’t waste your time on processes and trades that aren’t serving you or making you money. Evaluate your goals often and see what is working to propel you in the direction of your goals. Sometimes, it’s easier to see what’s not working than what is working. But, it’s important to really take note of what is working, so that you can keep doing it right and refining it in the future.

4. You don’t have a mentor. What if I told you that there was a single step that you could take to speed up your learning curve, diminish losses and propel you to faster success? Well, there is such a step and it’s as simple as this: find a mentor.

A mentor is someone who has already traversed the path that you are just beginning on. By hooking up with an established trader and learning from them, you can literally accomplish in months what would otherwise take years.

Basically, you get to learn from all of their hard-earned knowledge. This helps you to decide what paths to follow. It helps you to avoid common mistakes. It helps you grow faster. It’s amazingly effective: just ask my millionaire students.

5. You don’t do your research. Sure, when it comes to trading, there’s an element of trusting your gut instinct. But, don’t rely on instinct alone. Be sure to do your research, before you trade.

I like to wake up early, so that I have time to, among other things, research potential trades and scan the market with this life-saving scanning tool. Often, I will come up with information that will support what I am thinking about doing. However, sometimes I discover things that will change how I choose to approach the trade. Either way, it never hurts to be prepared.

6. You’re too scared to fail. It’s an all too common situation. A new trader is so afraid of losing money that they only pursue trades and business deals with minimal risk.

The trouble is that to really see rewards, you have to embrace a little bit of risk. Yes, it’s scary. Yes, you might lose money. But, you won’t lose as much money as you will potentially lose by not trying. You don’t ever have to love risk, but you do have to create a better relationship with it.

7. You don’t learn from your mistakes. As previously noted, you need to gain a level of comfort with risk. But, this doesn’t mean that you should act rashly.

You will make mistakes as a trader. You will lose money. But, the way to keep from losing money over and over again is to learn from your mistakes. When you make a mistake or a trade goes bad, take time to reflect on what went wrong. This way, you can avoid that error in the future and emerge stronger.

8. You’re stuck. William S. Burroughs said, “when you stop growing you start dying.” This is absolutely true when trading. Maybe you’ve figured out a good system of making money that is working for you. But, will it keep working in exactly the same way, forever? No way. It’s important that you keep growing, so that you can remain nimble and grow and flex as the market shifts.

The key is to never get complacent and think you’re done learning.  I urge you to continue to learn, to network and to obsessively follow the market. This is what will keep you making money in the long run. If you begin to stagnate, your earning potential will instantly begin declining.

Losing money, every now and again, is part of the process of trading. However, if you notice that it’s happening time and time again, it’s time to make some changes. By making simple changes in your habits and in the way that you approach your work, you can begin to reduce your losses in a big way.

Timothy Sykes is an entrepreneur and a stock market expert, self-made millionaire stock trader, former hedge fund manager and author of the bestselling book “An American Hedge Fund”. He has several millionaire students now and has been featured on CNN, Fox News, CNBC and more and has spoken at prestigious institutions such as Harvard University. Watch his media appearances and speeches on YouTube here. This article originally appeared on timothysykes.com.

Eight Reasons Why Traders Keep Losing Money